Cable

J.D. Power: TelcoTV Beats Cable

Bernie — Wed, 01 Oct 2008 21:16:28 -0400

The latest J.D. Power rankings for television service has AT&T U-verse and Verizon FiOS beating cable companies in customer satisfaction. There’s a sense of irony here, because according to J.D. Power, cable companies have been beating phone companies in telephone satisfaction. Payback I guess. AT&T U-verse led the pack, with the highest ratings in three of the four regions, including North Central, West, and South. Verizon FiOS ranked highest in the East region. WOW was the highest rated cable company, finishing second in the North Central region. DirecTV was the highest rated DBS provider, finishing second in the East.

Like the cable companies ratings in voice, telcoTV providers are probably on somewhat of a honeymoon with subscribers. Being the new kids on the block with new features and aggressive promotions tends to leave a “good taste” in the mouth of consumers. These ratings will mean much more after a few more years of competition in many more markets than today.

Study: Consumers Prefer Telco Bundles Over Cable

Bernie — Tue, 30 Sep 2008 10:34:03 -0400

A new customer satisfaction study conducted by CFI, a Michigan based customer satisfaction market research firm, reveals that consumers prefer to receive bundled offerings from telecom carriers over cable companies by almost 2 to 1. The second annual Telecom-Cable Industry Satisfaction Study surveyed 1,200 households for satisfaction with video, broadband Internet access, and wireless communications using the University of Michigan’s American Customer Satisfaction Index methodology. The study’s authors suggest that “customer satisfaction provides telecom companies with a competitive advantage.” Interesting survey findings include:

Nearly 60% of surveyed households now have bundled services (telecommunication, internet, and video), a 13% increase since 2007
Until fiber becomes more accessible, cable will have the edge in speed, but customers are increasingly sensitive to rising rates and poor customer service coming from cable providers
Poor customer service accounts for 40% of churn from Cable TV service
Of customers who will switch carriers, 40% say that the competition offers better rates and plans
Nearly 50% of households are interested in VoIP and IPTV, but awareness for either has changed little over the past year
When telecom customers switch to cable, the primary reason is
faster internet access
Twenty-nine percent of customers have no intention of bundling at all, preferring instead to pick and choose the services that best meet their needs
Providers tend to offer special programs and rates to new customers, while effectively ignoring loyal customers, resulting in extreme dissatisfaction

The last bullet point really struck a chord with me. I often wonder about the strategy of offering the best deals to new customers, often at the expense of existing loyal customers – at least from the existing customer’s perception. I recognize the goal with such a strategy is growth, but I wonder if that growth strategy ultimately alienates existing subscribers, causing them to churn away, and thus defeats the purpose.

These study results also seem to somewhat contradict recent J. D. Power customer satisfaction findings, which said that cable companies are beating telcos with telephone service satisfaction. It’s not an apples to apples comparison, but it does reveal elements of the bundle appear to be up for grabs. When put in the context of the whole bundle, cable seems to be losing (at least if you believe these CFI results). But when each service is looked at individually, different results may occur.

Feet on the Street is Answer to Telco Competition

Bernie — Tue, 09 Sep 2008 22:26:44 -0400

Comcast COO Steve Burke says the way to counter competition from telcoTV competitors is to put “feet on the street” and get local. Burke made the comments at the Merrill Lynch 2008 Media Fall Preview in Marina Del Rey, Ca. Burke is talking about getting back to cable TV sales and marketing basics – knocking on doors and taking names. According to Burke, it’s working. “In places where we’re competing against FiOS, we’re doing better this year than we were last year or the year before,” he said.

Cable, more so than telco has a long legacy with knocking on doors. I can remember some decades ago, when the cable man showed up at our door. He was an excellent salesman because he managed to co-opt my brother and I into the sales process. There we were, the three of us trying to convince my mother how desperately we needed that 30 channel package. After all, what household in the early eighties could get along without HBO? She respectfully declined. But it didn’t last long – she eventually gave in. The moral of the story – feet on the street banging on doors works. And cable has much more experience at it than telco. Is this tried and proven sales strategy behind telco's DSL losses last quarter?

Is Cable Pulling Away From Telco?

Bernie — Wed, 30 Jul 2008 20:20:27 -0400

Comcast released their quarterly numbers today, and they potentially offer some bad news for telcos. It begs the question, is cable pulling away from telcos in the competitive race? Perhaps. But we also know this race is a marathon, not a sprint. First let’s look at some numbers for Comcast’s 2Q08:

278K new broadband subs in 2Q08, 14.4 million total, representing 29% penetration of homes passed
555K new digital voice customers, 5.64 million total, representing 12.5% penetration of homes passed
Lost 138K basic video subs, but gained 320K digital subs

Pretty impressive when put into the context of their major telco competitors, who are "licking their DSL net adds and switched access line loss wounds." I guess we know one of the reasons why DSL growth slowed so much last quarter. From a 2Q08 perspective, Comcast kicked telco butt. Sanford C. Bernstein & Co. Inc. analyst Craig Moffett tells Light Reading’s Cable Digital News, “...that U.S. cable will own as much as 90 percent of the broadband net additions when the book on second quarter is closed.” What’s even more alarming for telcos is that Comcast CFO Michael Angelakis revealed that new, “premium Internet tier” additions were added at a four-to-one ratio when compared to their “economy” tier. That suggests that cheaper priced broadband is not as appealing as faster more robust packages. If that is indeed true, than DSL may be in even more trouble. DSL is considered the “value” option because, generally speaking, it costs less than cable modem. But if customers are opting for faster bandwidth over cheaper pricing, cable may have an inherent advantage. An advantage that will only be enhanced when DOCSIS 3.0 or wideband becomes more available. Are all the “value” conscious broadband subscribers gone?

Competition Not Lowering Retail Cable Rates

Bernie — Mon, 07 Jul 2008 22:34:56 -0400

A recent survey sponsored by the Alliance for Community Media and the National Association of Telecommunications Officers and Advisors indicates that despite growing competition for incumbent cable operators, retail cable rates are actually rising. Sixty-six percent of the survey respondents said basic cable rates have increased in their communities, even after the arrival of competition. The survey focuses on the trend of statewide cable franchising bills, which the survey sponsors oppose, citing the loss of control by local communities for franchising issues. Only 1% of the respondents indicate lower cable rates as a result of new competition, which is coming mainly from telcoTV operators like AT&T, Verizon, and hundreds of independent telcos. Multichannel News offers more details on the survey results.

Having a market research arm at Telecompetitor’s parent, Pivot Media, I’m certainly not one to bash survey results. But I would argue that this issue needs more time before firm conclusions can be drawn. Competition between cable and telco simply hasn’t been present long enough in a sufficient number of markets to conclude that retail rates have not been impacted. I would also argue that while retail rates may not have dropped, their rate of ascent surely has been slowed by the arrival of competition. Additionally, perhaps a more accurate measure of competitive impact may lie with digital cable rates, since telcoTV offers are more closely aligned with digital tiers.

Cable Industry Turns to Blogging for Latest PR Campaign

Bernie — Wed, 09 Apr 2008 09:26:05 -0400

The cable industry has embraced blogging for its latest public relations campaign. The campaign basically tries to refute cable’s negative reputation of continually raising prices and offering poor customer service, by positioning the cable industry as the main driver of dismantling the century old telephone monopoly in the U.S. IP Democracy reveals the strategy in this recent post.

The National Cable and Telecommunications Association (NCTA) is leading the charge through a $1 million dollar online ad campaign, which buys ads on leading blog sites. Those ads link back to a NCTA operated blog, CableTechTalk, which offers commentary about cable’s role in competiton. It’s an interesting strategy for such a traditional industry. It will be interesting to see if and/or how the telecom industry responds.

Tit for Tat Spat Between Verizon and Cablecos

Bernie — Thu, 27 Mar 2008 08:34:51 -0400

First it was the cable companies complaining to the FCC about Verizon breaking the rules with their “prevent defense.” Comcast, Time Warner Cable, and others complained that Verizon was trying to prevent Verizon customers from leaving once they received a number portability request from a cable competitor. The cable companies accused Verizon of aggressively pursuing those customers with a “please don’t leave” campaign. Cablecos complained, saying that practice is against the spirit of FCC rules and may be breaking the law. Verizon says nonsense, and that they are just doing a routine marketing strategy.

Well now its payback time. Verizon is now the complainer and has petitioned the FCC, asking that the process for switching cable service should be streamlined. By Verizon’s estimation, it’s somewhat easier to switch phone companies than to switch video providers. For switching phone companies, but keeping the same telephone number, there is an “automated” number portability system, where a customer simply tells their new phone provider they would like to switch. The prospective phone service provider initiates the number portability request on behalf of the new customer. But according to Verizon, when a customer wants to switch video providers, they have to initiate the disconnect themselves from their existing provider. Verizon says “no fair.” “This significantly complicates the process of switching video providers, thereby entrenching the cable incumbents' dominant market position," Verizon said in the petition. Of course the cable industry begs to differ. “Verizon's fairy tale complaint is a lame attempt to deflect criticism from its years-long illegal practice of misusing proprietary information to prevent consumers from switching to a new phone provider," Brian Dietz, vice president of Communications for the National Cable & Telecommunications Association (NCTA) said in a statement. Life in the fast lane of competition, I guess.

Cable May Be Stepping Up to the WiMAX Plate

Bernie — Wed, 26 Mar 2008 08:15:07 -0400

Cable’s lack of a clear wireless strategy has been seen as somewhat of an “Achilles heel” for them. After all, their growing competitive nemesis, namely AT&T and Verizon,, have clear wireless strategies and are executing them quite well. The ability to grow the triple play bundle to include wireless (the so called quad play) hasn’t been around long enough to draw firm conclusions about its competitive impact. But most analysts would agree, all things being equal, having a wireless option in your back pocket should prove to create an advantage. The other issue of course is wireless’ role as a growth engine. AT&T and Verizon have it and their triple play cable competitors do not.

All this leads to speculation about cable companies getting into wireless, and quickly. A recent Wall Street Journal article adds to the speculation by reporting that Comcast, Time Warner and Brighthouse are in talks with Sprint and Clearwire to invest significantly in a WiMAX partnership. According to the article, the three cable companies are talking about investing close to $1.7 billion, with Comcast being the lead with $1 billion. One idea suggests that the cable company investment would give them access to wholesale capacity to launch their own branded wireless service. Cox recently signaled their intention to pursue some type of wireless strategy as well by acquiring $305 million worth of 700 MHz spectrum.

While conceivably it makes sense for these companies to partner, it does have a little cloud hanging over its head. After all, these are the same companies that jointly launched the ill fated Pivot Wireless. Will they learn from those mistakes? These same companies are also sitting on a boat load of AWS spectrum. Perhaps they’ll look to leverage that spectrum in this venture, although there is no clear path for WiMAX over AWS spectrum. All this chatter points to a somewhat simple reality. Cable recognizes that it’s probably in their best interest to have a wireless arsenal of some type going forward. It would be a wise hedge against telecom competitors seizing a potential quad play rush. The real question is, can they figure it out fast enough? With wireless penetration exceeding 80% in the U.S. and telecom having such a wide lead, cable risks wireless irrelevancy before they even get going, unless they get going quickly.

Cable Companies Go Canoeing Together

Bernie — Tue, 11 Mar 2008 00:30:48 -0400

The nation’s six largest cable companies are planning to launch a jointly owned company that would allow national advertisers to purchase an ad from a single entity, which in turn would appear on all six systems. Comcast, Time Warner Cable, Cablevision, Cox Communications, Charter Communications and Bright House Networks are in the process of finalizing the new company, which has been codenamed Project Canoe. The goal of Project Canoe is to provide targeted ad opportunities across all of these MSOs and increase the cable industry’s ad revenue take from $5 billion a year to $15 billion a year.

Read more details in this New York Times article.

Competitive Landscape Takes Time to Develop

Bernie — Wed, 30 Jan 2008 08:30:09 -0500

Michigan passed a law, Public Law 480, about a year ago that lowered some barriers to market entry for incumbent cable company competitors. The goal was to encourage competition on the local level for cable TV services by allowing basically a statewide franchise. Multichannel News reports that a recent study reveals very little competition has actually arrived. Only 110 communities out of a possible 2,000 now have a legitimate competitor. Commenting on the study’s results, Michigan’s attorney general Jon Kreucher put a new twist on cable’s triple play accomplishments. "Unfortunately, cable companies scored the triple-play last year: Very poor levels of new competition, exceptionally bad levels of customer service, and prices that often increased ten times faster than the national consumer price index for other forms of recreation," said Kreucher. Needless to say, Michigan authorities are disappointed in the lack of competitive progress.

The Michigan example illustrates the reality of the competitive landscape. Beyond major metro markets, competition takes time to develop. As Gary Kim points out in his IP Carrier blog post, competition is expensive and time consuming. The cable overbuilding business is not for the faint at heart. Outside of the urban and suburban markets targeted by AT&T, Verizon, and the few remaining cable overbuilders, your left with the independent telco sector to fuel competitive build outs. While independents have been quite active with triple play competitive offerings, they aren’t in a position to dramatically increase competition on a wide scale basis. They simple don’t have the scale. It’s generally one community at a time. At that pace, tens of thousands of communities across this country will be lucky if they ever see facilities based competition for cable. Some will argue DBS is enough and if the market conditions are right, a community regardless of location will eventually see competition. In other words, you can’t force competition on a market where the returns for multiple operators don’t warrant it.